Fund Investing

When two large money-management organizations become one, there will inevitably be loss of jobs. So it is at fund manager Mackenzie Investments, which has absorbed the in-house investment operations of the Investors Group funds.

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Rudy Luukko is editor, investment and personal finance, at Morningstar Canada. Before joining Morningstar in 2004, he worked as an editor and writer for various general, specialty and institutional media. He holds a Canadian Investment Manager (CIM) designation and a Bachelor of Journalism degree from Carleton University. A former chair and founding member of the Canadian Investment Funds Standards Committee (CIFSC), he has also co-authored courses for the Canadian Securities Institute. He welcomes your comments at rudy.luukko@morningstar.com but cannot provide individual advice. Follow Rudy on Twitter: @RudyLuukko

Mackenzie and Investors Group are both part of IGM Financial Inc. (IGM), which is committed to preserving two separate fund families. As a result, the emphasis in this joining of forces is on expanding capabilities at Mackenzie rather than cutting costs.

There will be savings -- approximately $10 million a year -- as IGM disclosed during a Nov. 3 conference call for analysts. But in the context of the total investment-management budget, the savings are relatively modest and were not the driving factor in bringing the fund managers together, company officials say.

Announced on Oct. 19, the integration leaves 106 investment professionals on the payroll of the combined operation that will be responsible for a total of $130 billion in Mackenzie-managed assets at Investors Group and Mackenzie. That's 17 fewer professionals than the two organizations previously employed in these roles. As Mackenzie's chief investment officer Tony Elavia observed in an interview with Morningstar: "Clearly, when you put together two large organizations there is going to be some duplication."

However, the vast majority of Investors Group managers have kept their jobs and are responsible for the same assets as before. In part, this is because Mackenzie has chosen to create three teams staffed by former Investors Group personnel. They complement existing teams -- or boutiques as Mackenzie also calls them -- such as Mackenzie Cundill and Mackenzie Ivy.

The three new teams added to Mackenzie, each continuing to be led by former Investors Group senior managers, are:

Asian equities, based in Hong Kong and led by Nick Scott, who was an Investors Group senior vice-president and head of Asian equities. He now assumes that role for Mackenzie. This seven-member team's responsibilities include the $1.3-billion Investors Pan Asian Equity.

Portfolio solutions, based in Winnipeg. This three-member team is led by Les Grober, who was head of asset allocation for Investors Group. The team's responsibilities include managing the Allegro and Maestro fund-of-funds portfolios.

"These are all new capabilities being added under the Mackenzie umbrella," says Elavia, who worked on the consolidation with his counterpart Jeff Singer, who has been Investors Group's CIO for the past four years. Singer, who is assisting in the transition, is due to retire effective Dec. 31.

Of the now 13 Mackenzie teams, the largest is North American equities. It combines Mackenzie's all-cap value boutique, which was led by Hovig Moushian, with the Investors Group's North American equity team of managers. Though not considered a new team, it is much expanded, with 22 investment professionals, including Moushian.

The leader of the combined North American team is Martin Downie, who was an Investors Group senior vice-president and head of Canadian equities. Along with his increased personnel responsibilities, Downie continues as the manager of the largest Investors Group fund, the $17.1-billion Investors Dividend.

The greatest cutbacks were in fixed income, with the Investors Group team eliminated. Among the departed managers is Jeffrey Hall, who was a senior vice-president and head of fixed income for Investors and had been with the company since 1994. Portfolio management for all of the Investors Group fixed income and money-market funds will be carried out by an expanded 11-member team led by Mackenzie's head of fixed income, Steve Locke.

Mackenzie also wielded the axe overseas, eliminating the Dublin team's responsibility for managing global equities. As a result, Investors Global and Investors Global Dividend are now being managed by the Toronto-based global equity and income team led by Mackenzie's Darren McKiernan. The most notable job casualty in Ireland was Peter O'Reilly, who joined the Investors Group organization in 2000 and was senior vice-president and head of global investments.

Unaffected by the consolidation is Graham Zakaluk, the portfolio manager of the $5.3-billion Investors Real Property. He isn't assigned to any of the 13 Mackenzie teams, since he has a very distinct role that doesn't involve investing in securities. Zakaluk manages the largest mutual fund of its kind in Canada, which invests directly in commercial, industrial and residential properties.

Mackenzie investment teams are no strangers to Investors Group clients. Mutual funds managed under the IG Mackenzie brand constitute about 10% of Investors Group's nearly $86 billion in mutual-fund assets. Another 16% of assets is sub-advised by various third-party managers such as AGF, Beutel Goodman and Fidelity. Here, too, it's business as usual with no immediate changes. "All of the sub-advisors continue to be in place," says Elavia.

Though Elavia will have input, any sub-advisory changes for the Investors fund family will be the responsibility of Investors Group executives and product managers. The Mackenzie funds, sold by third-party dealers and brokers, and the Investors Group funds sold exclusively by a proprietary sales force, will continue to have distinct distribution models. For that reason, they'll also maintain distinct product shelves.

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